World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Friday, March 11, 2011

Multiple sources now report that Martin Armstrong was released from prison this week. I am glad he finally made it out and wish him the very best in the future.

Martin went through hell, was falsely imprisoned, and beaten nearly to death – an act witnessed by prison officials who took no action until the beating was over. I strongly condemn those who imprisoned and abused him. His was an example of how the money powers used their influence to capture the rule of law.

He needs time to improve his neglected health and hopefully we’ll be hearing from him soon. Thank you to all who supported him through his life altering ordeal.

Again, my compassion for those in Japan. Nature is amazing and every once in awhile shows us humans who it is that is really in charge. It reminds me of the fact that we can build houses and buildings near shorelines in earthquake zones while ignoring the negative possibilities, but then those black swan events come along and teach us how foolish it is to ignore those possibilities.

The same thing is coming for global markets. We have ignored the math of nature and are building very flimsy paper money markets the world over. Unfortunately, those living the fantasy of paper markets are going to experience such a tsunami, it is just a matter of time in my opinion.

Equity markets are actually close to even at the open, the dollar is down, the Yen is higher, oil is down, gold and silver are down, and food commodities are also lower.

It’s likely that the earthquake initially damages the Japanese economy, but that later on there will be a rebuilding effort that will actually act to stimulate it. This is the pattern that we saw after the Kobe earthquake for example. I also think the initial reaction to commodities may be short lived, and may prove to be the exact opposite reaction as commodities from oil, to rice, and seafood may be very impacted.

Turning back to the U.S., Retail Sales were reported on consensus, rising 1.0% in February which is up from .3% in January. As you read the non-thinking report from Econoday, keep in mind that Retail Sales are measured in dollars. If real inflation is 12%, then it would take a 1% monthly rise to mean that REAL sales are even. Also remember that this report contains huge errors due to substitution bias – that is that it only measures sales at stores that have been open for 12 months or more, those that have gone out of business are simply tossed aside. This is the same exact error that causes people to think that STOCKS rise over the long haul when in fact stocks on a whole do not rise in the long run – they live through a life cycle and eventually die. It is only the indices that rise, and that rise over the long haul is ONLY due to substitution bias. Here’s Econoday:

HighlightsRetail sales spiked in February on higher auto sales and on higher gasoline sales. But other components were mostly robust. And we got a large upward revision to January. Overall retail sales surged 1.0 percent, following a revised 0.7 percent boost in January and a revised 0.6 percent increase in December. The February posting matched analysts' expectation for a 1.0 percent jump. January and December had previously been estimated to be up 0.3 percent and 0.5 percent, respectively. Excluding autos, sales advanced 0.7 percent, following a 0.6 percent gain in January. A notable part of this increase was price related on higher gasoline prices. The median market forecast called for a 0.7 percent increase. Nonetheless, sales excluding autos and gasoline improved a strong 0.6 percent, following a 0.5 percent rise in January.

The February boost in sales was led by a 2.3 percent jump in sales of motor vehicles & parts with gasoline sales up 1.4 percent. Nearly all other major components were quite robust. Other notably strong components were sporting goods, hobby, book & music stores, up 1.3 percent, and food services & drinking places, up 1.2 percent. The latter is especially encouraging as it is a very discretionary category. Even the price depressed electronics component made a 0.9 percent comeback. The weakest major category was the housing-depressed furniture & home furnishings category, down a monthly 0.8 percent.

Overall retail sales on a year-ago basis in February rose to 8.9 percent from 8.1 percent the month before. Excluding motor vehicles, sales were up a year-ago 6.0 percent, compared to 6.4 percent in January.

Despite price effects, the latest retail sales numbers reflect a strong showing by the consumer. The February numbers plus upward revisions will have economists revising their estimates for first quarter GDP but his time it will be upward. Equity markets firmed a bit on the upward revisions but remained negative over concern about the economic impact of the earthquake in Japan and ensuing tsunami.

Strong showing from consumers? No, what you have are consumers who have no choice but to buy more expensive everything – gas, food, clothing. When the cost of things consumers buy goes up without a corresponding increase in income, then the added expense works as a tax, taking discretionary spending away from consumers. In that circumstance, it will result in an APPARENT surge, followed by collapse. That is what I expect to see given the fullness of time.

Meanwhile, the markets have already broken below support with all the major indices closing below their respective 50 day moving averages. They closed right at, or slightly below, their lower Bollinger bands, so it may take some time to turn those down and out of the way:

The reaction to the tsunami is important – will world central bankers “stimulate” out of fear? If they do, they will mistakenly add fuel to the already raging inflationary fire.

The McClellan Oscillator is very negative – we are still under a Hindenburg Omen and new 52 week lows are beginning to rise. The VIX has broken out higher and now has a point & figure target of 38:

My thoughts on the market are admittedly turning dark. I no longer value technical analysis because I know how subverted the markets have become with the “Fed” and large banks directly playing with them – they ARE the markets as they comprise the vast majority of transactions. Thus the markets are not real, they are simulated and manipulated devises run by the powers who create money from nothing. I think it’s flat out foolish to support such insanity with your own money and efforts. It’s all fraud, all the time. I see no instrument that I consider SAFE. I see a tsunami coming, and it’s going to wash all that false paper away – unfortunately, I can’t tell you when and believe that you should ignore those who think they can. All I know is that the math is impossible, and thus in the big picture it won’t be too long.

I wish I could drag those players out of OUR markets, if I could I would. I know that it’s fruitless to shout GET THE HELL OUT, but that’s exactly how I feel. Collectively we all need to act, and some point there’s going to be a triggering event that stirs us all into action. In the mean time, this tsunami and the interference in the markets has me feeling…

Thursday, March 10, 2011

Equities are sharply lower this morning with the dollar higher, bonds higher, and most commodities lower.

Spreads in Europe continue to widen, Spain’s debt was downgraded and spreads there are rising quickly. China is decelerating quickly with markets falling.

In Wisconsin the Senate bypassed the Democrats and passed the Governor’s anti-union legislation. Now Democrats are coming back to Wisconsin from their self-imposed exile to “take back their government.” Good luck with that, you will not truly do so until you change out WHO it is that produces and controls the money in this nation. Until then you and everyone else are victims of the impossible math created not by the unions, but by the central banks.

And what happens when legislation is introduced to reel in the bankers? Why the threats flow like flood waters, and the markets tumble, that’s what. The latest threat? How about capping debit cards to $50 per transaction?

NEW YORK (CNNMoney) -- Declined! Your debit card may soon be denied for purchases greater than $100 -- or even as little as $50.

JPMorgan Chase, one of the nation's largest banks, is considering capping debit card transactions at either $50 or $100, according to a source with knowledge of the proposal.

Why? Because of a tricky thing called interchange fees.

Right now, every time you swipe your debit card, your bank charges the retailer an average fee of 44 cents, which it shares with its partners. Those little fees, however, add up to about $16 billion per year, according to 2009 data from the Federal Reserve.

But as part of the Wall Street reform legislation that was passed last year, these fees are being slashed. The Fed is currently proposing rules that would go into effect in July and would cap interchange fees at 12 cents.

That's a big enough cut to cost Chase (JPM, Fortune 500) more than $1 billion a year. And Chase may not be alone. Other major issuers are also projecting huge losses from the interchange fee cap.

Joe Price, president of consumer banking for Bank of America (BAC, Fortune 500), said in an e-mailed statement that the lower fee wouldn't fairly compensate the bank for the infrastructure and services it provides to retailers.

That’s right, the threat is that if you take away usurious fees from the banks, then they will cap transactions and make life difficult for everyone. They can do this because it is THEM who control the money! YOUR MONEY!

What the banksters fail to realize is that the money system of the United States belongs to the people, not the private banks. Sadly, the people also largely fail to understand this. Of all the infrastructure in the world, the money system and the production thereof is THE most basic and necessary GOVERNMENT function. Threats like this are the exact reason that the government must take back control of our money. But we know that’s not happening, and thus the impossible math mounts and “other events” continue to pick up pace.

Here’s an “other event” you may not have envisioned – try the price of lettuce rising 220% in just 3 weeks and school districts removing lettuce and other veggies from your children’s school lunches:

Are you angry yet?

Of course the weather affected the crops, that never happens in the winter does it? What’s the real reason? Try injecting more than $100 Billion per month of hot money into the banks who use it to speculate all over the globe, and that’s how little glitches turn into instant hyper price inflation. Right now that spillover is rotating from one hot sector to the next, but price gains like this ratchet up one item after the other. That is everything except income – and that is why we are hitting a wall.

Oil prices are not going to cause recession once we hit $140 a barrel, that is nonsense. We’ve been in recession for well over a decade now, and any oil price over $80 a barrel rapidly kills the U.S. economy. We passed that mark months ago.

Oh yay, foreclosures are down from their horrific levels… but only due to the dysfunction of the banking industry and foreclosuregate. Of course the politicians know that if they really put the bankers in their place, then everything comes unwound. They don’t have the balls to do what’s right and what’s necessary, so they cower in fear while taking the banker’s special interest money.

And we STILL are running unbelievable trade deficits as we buy things from overseas that we can’t pay for:

HighlightsThe U.S. trade deficit worsened sharply and oil had only a small role in it. But the detail in imports indicates it may be a response to healthy demand. The overall U.S. trade deficit in January widened to $46.3 billion from a revised $40.3 billion shortfall in December. The January gap came in worse than analysts' forecast for a $41.0 billion deficit. Exports gained 2.7 percent, following a 2.0 percent boost the prior month. Imports posted a huge 5.2 percent increase after rising 2.6 percent in December.

The expansion of the trade deficit was led by the nonpetroleum goods gap which grew to $32.0 billion from $27.0 billion in December. The petroleum shortfall widened moderately to $26.7 billion from $25.5 billion the prior month.

Looking at end use categories for goods, the jump in imports was led by a $4.4 billion spike in industrial supplies but only $1.7 billion came from oil imports. Notably, capital goods imports excluding autos jumped $2.1 billion while automotive imports increased $2.7 billion. The surge in these imports may be related to meeting expected demand and this actually would be a positive sign for forward momentum although for the near term, it means a downward revision to first quarter GDP growth estimates.

On the news, equity futures dipped on the belief that first quarter GDP is not as strong as earlier believed. Also, a rebound in initial jobless claims weighed on equity futures-though the weekly volatility led to some discounting of the rise.

Imports are rising because the central banks are creating monetary inflation – everything, except housing, is costing more dollars. Measure things in devaluing dollars and they appear to rise. Create enough dollars and you can even mask falling demand, which is exactly what is happening with oil and food.

HighlightsA catch-up from the prior holiday week fed a 26,000 increase in initial jobless claims for the March 5 week to a higher-than-expected level of 397,000 (prior week revised 3,000 higher to 371,000). The gain follows two prior weeks of sharp decreases reflected in the four-week average which rose only slightly to 392,250. A month-ago comparison still shows significant improvement of nearly 25,000. The Labor Department noted that a school break in New England, when bus drivers and other personnel are laid off, also increased claims.

Continuing claims extended their decline, down 20,000 in data for the February 26 week to 3.771 million. Continuing claims have fallen for five of the last six weekly periods. The unemployment rate for insured workers is unchanged at 3.0 percent.

Today's report will cut short hopes for strong momentum on the jobs front but not expectations for continued meaningful improvement. Markets are showing no significant immediate reaction.

The economy is STILL losing jobs. Not just once in awhile, but each and every week. And it’s been years now. And not just outright losing jobs, but our population is also growing and not creating any jobs for that larger population. What jobs are created are shells of what were middle-class living wages. Inflation is necessitating more earnings and more benefits, but workers are simply losing everything while bankers take home trillions for something they have no right to have in the first place. And that includes profiting from our nation’s debts which absolutely does not, and should not, have to be like that in the first place.

The wall of debt saturation is something I’ve discussed time and again. Adding debt to an economy that is comprised mostly of sovereign money (of which there is currently NONE), actually does create leverage and fuels job creation… temporarily. Once a money system becomes mostly debt, then adding more debt actually makes jobs go down as the cost to carry even more debt cannot be supported without giving something real up. And now we are so far into debt saturation that we already hit the wall, fell back and are trying, fruitlessly, to claw our way back beyond debt saturation – which of course is impossible. It’s impossible because it requires income to service debt, and the math is so far gone that it’s not even laughable, sad, or disgusting anymore – it’s just pathetic that we STILL haven’t removed the bankers from power.

So we hit the wall, fall back, and do it again because as a group we are psychotic. Literally. As in we don’t even acknowledge reality. Economic Mass Psychosis.

The markets? They are so far removed from reality that again it’s just delusional to even discuss it because none of the underlying numbers are real, much less work. Oh yeah, keep contributing to your “retirement” by giving your money to the HFT owners who are creating the holographic stock market - that will surely be to your benefit in the end. “Never been a better time to buy.”

And for the past two years people have now been conditioned that the market never goes down. This despite the fact that the truth is that in the long run the market never actually goes up. I can say that because every company of the original DOW Industrials has failed – all of them, including GE who lives only due to the criminals who revived them using your money. And in the past decade, even in nominal terms the broad market still is not near where it was, this despite the fact that your money now buys you far less.

The game is totally tilted in favor of those closest to the production of money, yet the production of money rightly is supposed to benefit all in society. We’re going to keep beating our heads against the wall until we get smart enough to take back that which was stolen from us in the year 1913.

Wednesday, March 9, 2011

Equity futures are lower this morning, the dollar is lower and back beneath what was support, bonds are higher, oil is higher and pressing $106 again, silver is close to a new record, while the hot money rotation momentarily avoids food commodities.

The completely worthless – well, except for a good laugh – Mortgage Bankers Association reported more wild and totally unbelievable numbers for the last week. They claim that in just one week their “Purchase Index” rose by 12.5%, and that Refinance activity increased by 17.2%, moving the composite up 15.5%! What a sad joke, and it proves once again that private organizations should not be allowed to publically report statistics on their own industry. Here’s Econoday, even they don’t seem to be buying it – even though we know these indices are near all-time record lows:

HighlightsOne week's data is only one week's data but the Mortgage Bankers Association believes improvement in the jobs market is "beginning to pave the way" for improvement in the housing market. MBA's purchase index, which measures volume of mortgage applications for home purchases, surged 12.5 percent in the March 4 week for its best reading of the year. Rates remain favorable, at 4.93 percent for 30-year loans. The refinancing index also revived in the week, up 17.2 percent for its best reading since mid-January.

We’ve actually seen worse from the MBA, what a circus act.

What really pushed my button yesterday was learning that Bank of America was going to create a “good bank/ bad bank” structure:

March 8 (Bloomberg) -- Bank of America Corp., the biggest U.S. lender by assets, is segregating almost half its 13.9 million mortgages into a “bad” bank comprised of its riskiest and worst-performing “legacy” loans, said Terry Laughlin, who is running the new unit.

“We are creating a classic good bank, bad bank structure,” Laughlin told investors at a meeting in New York today. He was promoted last month to manage the costs of resolving disputes stemming from the company’s 2008 purchase of Countrywide Financial Corp. “We’re going to get after this, we’re going to do it the right way and we’re going to put it to bed in the next 36 months,” he said.

The legacy portfolio will hold 6.7 million loans with outstanding principal balance of about $1 trillion, according to a presentation to investors today. The split leaves home loan President Barbara Desoer with about half her previous portfolio, as well as new lending going forward.

Laughlin’s portfolio will include loans that are currently 60 or more days delinquent as well as riskier types of loans the bank no longer originates, such as subprime, Alt-A, interest- only and option adjustable-rate mortgages, he said. He said the portfolios will be completely split by March 31 and that his will be liquidated over time. Of the 13.9 million loans Bank of America services, about 3.5 million are held by the company on its balance sheet. The rest are owned by other investors.

“It’s a way to get investors focus on the good,” said Paul Miller, a former examiner with the Federal Reserve Bank of Philadelphia and analyst at FBR Capital Markets in Arlington, Virginia. “It’s a way to talk about good things and ignore the bad.”

Yeah that’s a classic alright – a classic example of an illegal con job traditionally called The Shell Game.

In the shell game you move your assets into a new company and then offload your crap onto other hapless investors (like your retirement fund), or you then simply bankrupt the “bad company,” leaving original investors in the mud.

In this case, BOA is not actually forming a new company, they are separating their assets using accounting tools. LOL, and who, exactly, is going to sign off on this new accounting, I don’t know – but jail time seems apropos.

The scam, of course, is that they are trying to look more attractive so that they can scam new investors into their company. Also, by simply sidelining their trillion dollars in bad loans – their mistake, but not really a mistake when you can get away with illegal activity – they are then able to set about doing it all over again without using their “good investments” to pay off their creditors. The truth is that BOA is bankrupt and they absolutely should be forced to resolve their insolvency in front of a bankruptcy judge – that is the rule of law… that is being ignored and usurped.

This is NOT like a Resolution Trust! It is being done by a private corporation in order to benefit them, and it screws prior investors with no resolution whatsoever. This was also already done with Citi Bank, prolonging their life while regulators and law enforcement officials look the other way.

What I would do with the banks is I would force every single bank in this nation through a special bankruptcy, starting with the smallest banks and working my way up the chain. Any debts that are unserviceable would be defaulted, and it would be the banks that take the hit. Of course this would devastate derivatives, appropriately so – most should be illegal and would be if I were in charge.

Here’s the BOA propaganda for those who can see it for what it is – a marketing piece selling their illegal activity:

Zero Hedge this morning is reporting that “Bond King” Bill Gross has sold ALL his Treasury holdings! Oh, oh, does that mean no QE3 on the horizon? Could be. Either that or Bill is no longer an insider and is therefore selling his holdings. I’d bet he is still operating on inside knowledge (again illegal, but not if you’re a part of the club propping up the debt gangsters), and Bill knows that interest rates will rise and markets will tumble – thus he is long the dollar as it sits right on long term support.

Market? What market? All I see are a bunch of holographic manipulated images being fed to the masses in order to rob them of their earnings.

The DOW is still inside of its rising wedge, refusing to break down beneath 12,000. The rise in price yesterday was meaningless for the technicals as price is still inside of a potentially bearish flag:

Volume on the advance yesterday was once again lower than on the selling.

Interest rates are blowing out again on the PIIGS nation’s debts. The entire globe is saturated with debt and impossible math. It is truly a crying shame watching it affect real people’s lives around the globe, it certainly didn’t have to be this way. My hope is that the world moves forward and not backwards. That means that we need to change out our money system for one controlled by and to the benefit of everyone, not just a few individuals. It means not falling for the precious metals as money scam. It means not falling for any form of global money when that money is created by a few central bankers. And it means that any monetary system must have complete transparency, and that it must target ZERO percent price inflation while allowing the quantity of money to adjust beneath price stability.

Tuesday, March 8, 2011

Equity futures are flat just prior to the open this morning. The dollar is substantially higher and has returned to back inside of key support. Bonds are flat, oil is higher after being lower overnight, gold and silver are higher, while the rotation at least temporarily allows food commodities to soften.

The NFIB Small Business Index rose from 94.1 to 94.5. Econoday says that it shows “recovery is taking hold,” lol, based on that tremendous .4 rise in an index that is still well in negative territory below the even 100 mark. Sales are still reported as weak, and only 5% of companies plan on future hiring. The negatives in this report far outweigh any positives, and it comes just as oil is doing a moonshot – how will that affect next month’s sentiment? Here is the entire report – while most of it is off the bottom, it is certainly not positive:

Consumer Credit was reported yesterday for January. Coming in at an annualized rate of only $5.0 Billion, that is down from December’s $6.1 Billion. If you remove student loans, this number would have been negative. If you remove the $25 Billion of government Non-Revolving credit included in this report, it would have been hugely negative. There was a large split between Revolving and Non-Revolving Credit, Revolving credit being negative and Non-Revolving positive.

Now let’s compare the creation of Consumer Credit to what our own government is creating outside of the Consumer Credit report. The Congressional Budget Office yesterday announced that the Federal Government’s deficit for the month of February was the largest EVER, at $223 billion! That’s nearly a quarter TRILLION dollars in just one month! It is four times the amount of savings being proposed by the Republicans, and 30 times the saving proposed by the Democrats in their “budget talks.” Talk about exponential growth and impossible math, this is it.

...And that's what they admit to. The part they're hiding with accounting fraud is even larger.

And note that while Consumer Credit growth is “only” $5 billion at an annualized rate, the February deficit is $2.7 TRILLION at the same annualized rate! LOL, and people are still fantasizing about getting our deficits under control? Arguing about what to cut? Arguing about left vs. right? Laughable.

Want something to laugh at? How about nickels that will no longer contain any nickel because our money has been debased so much that the nickel is worth more than a nickel? A penny, even with minimum copper has cost more than a penny to make for quite some time. And now we learn that dollar bills have cotton in them, and that the cost to print paper money at the Mint jumped 50% in the past year, LOL, due to the fact that cotton jumped to a fresh 140 year high! It now costs the mint 9.6 cents to print a one dollar bill! At this rate of debasement, it won’t be long before it costs them more than a dollar to print a paper dollar!

And yet the “Fed” has the balls to talk about low inflation. What a joke. Their own policies have risen their own cost to print paper money by 50% in just one year. And that was before this year’s parabolic rise in commodity prices.

And in just the first four days of March, the Treasury has had to draw down $81.6 Billion of its “cash” in order to not exceed the debt ceiling before they said they would! That’s more than $20 billion per day! And it leaves the government with only $108 billion left TOTAL. Oh yeah, they will raise the debt ceiling and crank up the presses, you bet – they have to. And the exponential rise in the figures will continue to expand until the people are distracted with those pesky “other events” that will surely plunge the world into chaos. The chaos will be engineered to distract you from WHO created and profited from the bad math. No, I don’t mean the politicians – I mean the central bankers who created the government debt framework and who profit from the creation of money. Money that rightfully should only be created to the benefit of all the people, as our money system belongs to all of us, not a few individuals.

The market internals are weakening while at the same time the indices have managed to hold above their 50 day moving averages. There are several indicators that have deteriorated from the last time we were at this level, which is simply an extension of the negative divergences that have been in place for months and months now. It is money printing, plain and simple, that has held the market up so far, but with oil and other commodities now residing in outer-space, it’s only a matter of time before the façade crumbles - this market, and our economy, is already gone.

Monday, March 7, 2011

Equity futures are just ahead of even prior to the open. The dollar is slightly lower still trapped beneath what was support and is now resistance, bonds are lower, oil is higher and testing $106, gold is setting a new record high while silver jumps too, and most food commodities are also higher.

There is no data this morning, but Consumer Credit is released late this afternoon. This week will be a very light week for economic data. POMOs of course big time through Wednesday and on Thursday we receive the new POMO schedule. The daily POMOs are growing in size, that along with other ways the “Fed” is adding liquidity is creating one giant risk bubble – Zimbabwe style, but on a global scale.

Of course the economy and the stock market are two different things – yet psychologically many equate the stock market as a reflection of health in the underlying economy. At this stage it’s most certainly not, it is the product of hot money creation and fraud, there is little real that is currently underpinning the heights that the market has attained. This fantasy that inflating our money supply will someday result in a spontaneously healing economy is absolutely ridiculous. What it results in is starvation for those on the margins and violence as the difference between the haves and have-nots has already surpassed the revolution tipping point along the scale of despotism in most countries. The only thing keeping revolution at bay in the U.S. are our social welfare programs that keep genetically modified grain and plenty of corn syrup in the bellies of the underclass while those who can afford “organic” pay the extra price.

JPMorgan even managed to capture the food stamp program for the entire U.S., that’s how complete the capture of our government and people is.

But revolution is never that easy as the people in Egypt, Libya, Bahrain, Tunisia, and Saudi Arabia are finding out. I can’t help but think things are going to get far worse in the Middle East at some point… whenever things get out towards the edges, the risk of a larger event or series of events grows.

And no, oil is not doing a moonshot only due to tension in the Middle East. It requires hot money to fuel the rocket effect in price, and the world’s central bankers have certainly been supplying plenty of that. Still, those on the margins are already being dramatically affected by the high price, we are far beyond the tipping point for the U.S. economy. Oil above $80 has always resulted in economic pain, and this time will certainly be no different, especially for those living on the margins and the numbers of those marginal in our economy is growing daily.

For those keeping score, the pullback in the markets so far doesn’t even qualify as a pimple on Bernanke’s hot money rear. Still, as long as price remains below the upper blue line you see in the DOW flag below, it is possible that prices are still inside of a wave 2 movement about to move down in a wave 3. If prices rise above the top of the flag, however, then the hot money and HFT parade continue onto new highs starving the masses all the sooner: